WeedMD CFO Keith Merker outlined the benefits of the company’s newly leased cultivation facility and the next steps in retrofitting the greenhouse for harvest in 2018

WeedMD CFO Keith Merker (TSXV:WMD) believes that the strategic expansion initiative the company has made in leasing part of a 600,000 square-foot state-of-the-art greenhouse facility will be key to enhancing WeedMD’s position in the Canadian cannabis market.

In the article below, Merker discussed the positive impacts the newly leased facility will have on WeedMD’s cannabis production levels and how it will position the company amongst the highest echelons of Canadian licensed producers. Merker also highlighted the role of the management and cultivation teams in guiding WeedMD through licensing and bringing the company to its current position.

Below is a transcript of our interview with WeedMD CFO Keith Merker. It has been edited for clarity and brevity.

WeedMD CFO Keith Merker: WeedMD was founded in late 2013 when the Marihuana for Medical Purposes Regulations (MMPR), the regulatory body at the time, rolled out a new commercial infrastructure for cannabis cultivation and distribution in Canada. Unfortunately, we were not amongst the first companies to be licensed under the program and we navigating three years of licensing endeavors before obtaining our license in April 2016.

Now, we are fully operational, producing roughly 1,200 kilograms per annum out of our facility near Aylmer, Ontario. The facility is two hours southwest of Toronto and half an hour from London, Ontario.

INN: What does the recently announced expansion strategy and lease of a large-scale greenhouse mean for WeedMD?

KM: Under our recently announced expansion strategy, we have leased—with the option to purchase—part of a 98-acre farm from Perfect Pick Farms that has 600,000 square feet of state-of-the-art, recently completed greenhouse facilities.

To begin with, WeedMD will be leasing just over five acres or 220,000 square feet, with which we will be able to cultivate 20,000 kilograms of cannabis per annum. We have the option to expand into the whole of the facility over time, but the initial square footage will provide us with significant amounts of quality product, which will allow us to go to market very quickly. We plan to be harvest ready for the recreational roll out next July.

INN: What are the next steps with regards to this new facility and how does that fit into the company’s long-term plans?

KM: We have the necessary approvals from Health Canada and that has allowed us to begin retrofitting the facility. Up until three weeks ago, there were tomatoes growing in the five acres, which we’ve had to clear. Now, cement is being poured on the floor and we are building roads outside. Our next step, which is currently underway, is to build out our security measures for the property so that we can be granted our cultivation license. We also plan to leverage our Aylmer facility—just a half hour away—to provide the starting materials necessary to kick-off cultivation.

The costs associated with retrofitting the property are quite low and are fully funded under the $15 million convertible debenture financing we completed earlier this month. We also have a number of warrants issued with last year’s financing that are currently being exercised. As such, we have plenty of money in the bank and more than enough to conduct the retrofit, start cultivation and complete our first harvest next year.

INN: How will the increase in production position WeedMD against its peers?

KM: We view this opportunity as vaulting WeedMD from being a low-to-mid-tier producer into the upper echelons of licensed producers in Canada in terms of capacity. We did this with a much lower market cap than our peers and, as such, had to come up with a creative plan to help position us favorably.

We have landed on that with the structure of our deal with Perfect Pick Farms, where we are leasing to begin with and are working with exceptionally cheap retrofit costs. When we do exercise our option to purchase the land, we can finance a good portion of that purchase price and we will also be renting out a portion of it to Perfect Pick Farms for $1 million a year.

INN: Savvy investors know strong management is key to a company’s success. Are there any executives you would like to highlight on your board and management team?

KM: We have put together a fantastic group both at the executive level and within our facility. We have a motivated team in Aylmer, which includes Nick Trueman, our production and cultivation manager, who is doing an amazing job of consistently growing quality, top-notch cannabis. It also includes Doug McKee, who looks after inventory management, IT management and packing and shipping. He’s the guardian of the vault, so to speak.

Beyond that, Bruce Dawson-Scully is our founder and CEO and he is doing a fantastic job running the show, making sure that we execute on the strategy and differentiation aspects of our company. We also have Dr. Luc Duchesne, who is our chief scientific officer and is known as a thought leader in the US with respect to quality assurance and the science behind cannabis. Like all of us, he wears many hats, and he has done a great job at ensuring that we are in compliance with regulations and in conducting outreach amongst the QA community. The team that has gotten us here thus far has done an exemplary job and we look forward to continuing that trend, feeding back to shareholder value. We’re not taking the foot off the gas now.

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